The Blowback from Stripmining Labor for 45 Years Is Just Beginning

The clueless technocrats are about to discover that unfairness and exploitation can't be measured like revenues and profits, but that doesn't mean they're not real.

Economists and financial pundits tend to make a catastrophically flawed assumption. They tend to believe the technocratic myth that all human behavior boils down to financial incentives, data and metrics, as if all people make decisions based on interest rates, tax breaks and greed, the desire to maximize gains by any means available. (Cough, FTX, cough...)

The only other source of decision-making that's recognized by the punditry is political / ideological squabbling: people make decisions based on their self-interest as expressed through political / ideological positions.

But this doesn't exhaust the sources of human decisions and behaviors. People make life decisions for many other reasons which cannot be quantified or linked to financial incentives, interest rates or ideological beliefs.

For example, people can become fed up and quit caring: as in we pretend to work and you pretend to pay us, quiet quitting, opting out, laying flat and let it rot.

People get fed up with bogus propaganda designed to exploit them and with unfairness and corruption. For example, consider the endless spew of employers' syrupy propaganda aimed at convincing their employees that the corporation / institution / employer really, really cares--I mean really cares--about its (ruthlessly exploited) employees.

If the employers actually cared about their employees and demonstrated it with loyalty and real-world behaviors, they wouldn't need to slather on the phony propaganda. The employees would know the employers cared about them and their work because it was being demonstrated day to day.

The ugly truth is corporate / institutional employers stopped caring about their employees decades ago. This is the bitter fruit of hyper-financialization and hyper-globalization, which both reduce labor to a globally arbitraged commodity and an input cost that had to be cut to the bone to maximize shareholder value, i.e. profits and stock options that flow to the top management and top 5%.

This exploitation of labor resulted in the transfer of $50 trillion from labor to shareholders and management, the owners and managers of concentrations of capital which capture and distort governance mechanisms to serve the interests of capital to the exclusion of the common good and the workforce.

When employers stop caring about employees, employees stop caring about their work. No loyalty from employers is repaid in kind: employees have no loyalty to employers.

Everybody now understands they're slaving away not for a piece of the ever-receding American Dream but to make the already-rich even richer and to keep the workforce cowed, compliant and exploitable.

So people are fed up and choosing to exploit their employers if possible and if that's not possible, then stop caring and do the minimum to get by. This might mean cutting work hours, switching to gig-economy informal labor, retiring early, or switching jobs to get more for the same work.

In effect, people are choosing to reduce their dependence on exploitive structures by becoming more self-reliant: need less, invest in yourself, your family and community, shorten your personal supply chains, become productive on your own behalf rather than to the benefit of distant shareholders.

It's called blowback, or karma if you prefer. What goes around comes around. The workforce has been stripmined by the few at the top for 45 years, and now they're responding in kind: take this job and shove it, I ain't working here no more. (Per Johnny Paycheck's timeless classic, Take This Job And Shove It 2:31).

This blowback is just beginning and it's going to run farther and hotter than any of the clueless economists and financial pundits can even imagine. The clueless technocrats are about to discover that unfairness and exploitation can't be measured like revenues and profits, but that doesn't mean they're not real.

While Everyone Cheers Soaring "Wealth," America's Social Order Is Unraveling (October 1, 2021)



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Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
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The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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The Monopoly - Labor "Let It Rot" Death Spiral

The only rational response to this reality is to opt out, lay flat and let it rot.

In my previous post, The Bubble Economy's Credit-Asset Death Spiral, I described the self-reinforcing feedback of expanding credit and soaring asset valuations and how the only possible result of this financial perpetual motion machine was a death spiral of collapsing debt service, collateral and credit impulse.

But this didn't exhaust the destructive dynamics of this self-reinforcing wealth-creation machine for the few who own the vast majority of the assets. As longtime correspondent T.D. explains, this concentration of the benefits of financialization in the hands of the few also concentrates political power and the wealth to distort every function of the economy to enrich the few at the expense of the many.

This concentration of wealth and corruption isn't cost-free. As I've discussed here many times, capital siphoned $50 trillion from labor via hyper-financialization and hyper-globalization:

The Bill for America's $50 Trillion Gluttony of Inequality Is Overdue (September 21, 2020)

Our Phantom Middle Class (December 23, 2020)

Monopolies and cartels focus on self-enrichment, not social or economic stability. Concentrating wealth and power in the hands of the most self-serving few and their entrenched interests has crushed the ladders of social mobility. Assets such as a family home are out of reach in many locales for all but the few. Inflation, high taxes and the corruption of student loans, etc. have stripped all but the top 10% of any hope of gaining middle-class security.

The only rational response to this reality is to opt out, lay flat and let it rot: stop the self-exploitation of working to make the already-rich even richer. Direct resistance is easily suppressed by force. But "letting it rot" by withdrawing one's labor and conformity cannot be reversed with force. Once a critical mass of the workforce opts out of self-exploitation and "lets it rot," the system of financialization / exploitation of labor can no longer sustain itself and it collapses in a putrid heap.

Here's T.D.'s explanation of these dynamics:

Don't forget the 'monopolization effect' promoted by the cycle you describe.

Large organizations in any industry use their inflated valuations as leverage to acquire whatever resources are needed to bully their smaller competitors out of the game.

They can buy off politicians, regulators, talent, and competitors to ensure their market dominance.

It's happened in every industry--including healthcare.

It's also left every industry dominated by a small number of colluding Potemkin organizations reliant on financialization to generate stakeholder value. They are formidable appearing but bereft of talent and mission. When challenges appear they simply do more of the same, becoming ever more reliant on their financialization to keep their systems churning.

In healthcare we are left with consolidating providers and payers who deliver just enough 'care' to create the simulacrum of a 'health system' but in reality they are completely unable to cope with their putative mission.

Need proof? Imagine what health care would look like if there were no Federal dollars of any kind.

There would be no more palaces of healing, no indecipherable bills, and no onerous pricing.

Just a service priced on value as judged by the purchaser.

Through inflation, speculative price swings, regulatory opacity, and preferential access to capital, the system described in your post is quite intentionally designed to use ever-inflating capital valuations to take the value of labor from the wage-earner and place it in the pocket of those who have the capital.

That's why it's so vulnerable to those who withdraw their labor. They work outside the system, they limit the excess value they create by 'laying flat.'

Without the labor, there's nothing to steal.

And all the IRS agents in the world won't change that.

We're seeing a huge labor shift in healthcare. Last year the big news was the mass migration of nurses to the Agency model where they could earn 2-3 x their hourly wage--you read that right, wages had been suppressed for so long, a freer market was able to treble them.

There was significant regulatory pushback, as health systems accused agencies and the nurses they represent of price gouging (heh).

That didn't last long though.

It quickly became clear that those nurses weren't going to return to their jobs at their previous pay, even if the agency option was regulated away.

So now, needing those nurses on the floor, the dominant model is a hospital staffed with agency nurses earning far more (and happier!) than they would have as full-time employees

Through using complexity to capture each industry and reducing the individual rewards of overcoming that complexity, the system you describe has sowed the seeds of the labor shortage which will result in its own destruction.

And all the anxiety, distraction, and division they sow only accelerates the very thing they seek to prevent.

And those of us who can see it simply need to prepare, sit back, and watch.

Well said, T.D. Thank you for the explanation.



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A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
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The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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The Bubble Economy's Credit-Asset Death Spiral

Who believed that central banks' financial perpetual motion machine was anything more than trickery designed to generate phantom wealth?

Central banks seem to have perfected the ideal financial perpetual motion machine: as credit expands, money pours into risk assets, which shoot higher under the pressure of expanding demand for assets that yield either hefty returns (junk bonds) or hefty capital gains as the soaring assets suck in more capital chasing returns.

As assets soar in value, they serve as collateral for more credit. Higher valuations = more collateral to borrow against. This open spigot of additional credit sluices capital right back into the assets that are climbing in value, pushing them higher--which then creates even more collateral to support even more credit.

This self-reinforcing feedback of expanding credit feeding expanding valuations feeding expanding collateral which then feeds expanding credit has no apparent end. Modest houses once worth $100,000 are now worth $1,000,000, and nobody's complaining except those priced out of the infinite spiral of prices and credit.

For those priced out of traditional assets, there's NFTs, meme stocks and short-duration options. The credit-asset bubble-economy casino has a gaming table for everyone's budget and desire to "make it big" via speculation, since the traditional ladders to middle-class security have all been splintered.

This financial perpetual motion machine distorts traditional incentives. Why bother renting a house bought for speculative gains? Renters are problematic, better to just let it sit empty and rack up huge capital gains.

Count the lighted windows at night in all those new condo high-rises. Are even 20% occupied? Probably not.

This is how you get a "housing shortage": investors would rather keep units clean and off the market rather than risk renting units. When credit and asset valuations are both feeding an infinite expansion, all that matters is leveraging capital to acquire as many assets as possible to maximize the gains from this self-reinforcing wealth-creation machine.

This machine also incentivizes fraud. To really maximize gains, why not borrow clients' capital? Indeed, why not?

But unbeknownst to the central bank sorcerers and the greed-crazed participants, all systems have limits and all consequences have their own consequences, i.e. second-order effects. There are many such dynamics which are eroding the apparently unbreakable financial perpetual motion machine.

One is debt saturation. Even low rates of interest eventually pile up consequential debt-service obligations, and any weakening in revenues, cash flow or income exposes the borrower to a cash crunch which can only be resolved by selling assets.

Another is the widening disconnect between financially sound valuations and "market" valuations set by rapidly expanding credit and collateral. Based on rental income or cash flow, Asset B is worth $200,000, but it's currently valued at $1 million, and still rising. Obviously, traditional methods of valuation no longer apply.

But weirdly enough, they do. Debt service doesn't matter when your collateral is expanding so fast you can borrow mountains of capital at "low, low prices" and not even consider debt service. But once collateral stops rising and interest rates start rising, suddenly all those absurd obsessions with cash flow start making sense.

But too late, too late: bubbles, regardless of how rock-solid the sorcery, tend to manifest symmetry: they fall at roughly the same rate and magnitude as they rose. As collateral declines, loans slide underwater as the asset is not longer worth more than the outstanding loan. Credit dries up and so does buying as greed-crazed buyers start worrying that perhaps the asset they're about to buy might actually be worth less next month (gasp).

Liquidity and the credit impulse aren't sorcery, they're herd behaviors. When the madness of the herd switches from greed to panic, buyers disappear and thus so does liquidity--the ability of sellers to find a Greater Fool to buy the depreciating asset.

Greater Fools are soon wiped out and then there's nobody left who's dumb enough to buy assets that are in freefall and still far above any financially prudent valuation. The magic circle reverses, and as valuations fall, collateral shrinks and credit collapses. Lenders who greedily reckoned valuations and thus collateral would rise forever are stuck with life-changing losses--along with all the punters who built shanties of credit and leverage they mistakenly viewed as permanent palaces.

In making the economy dependent on the financial sorcery of self-reinforcing credit-asset bubbles, central banks and all the greed-crazed punters who participated have guaranteed a self-reinforcing death spiral as the "virtuous" self-reinforcing wealth-creation machine reverses into a self-reinforcing wealth-destruction machine.

Who believed that central banks' financial perpetual motion machine was anything more than trickery designed to generate phantom wealth? Once the death spiral reaches its devastating end-game, the true believers will have fallen silent.



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Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
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The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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This Is of Course Insane

Greed is a powerful motivation to be an ardent believer in the central banking cult.

The ideal cult convinces its followers that it isn't a cult, it's simply the natural order of things. In current terms, this normalizes insane behaviors and beliefs. Sacrificing youth to appease the gods isn't a cult; it's simply the natural order of things. If we don't sacrifice youth, bad things will happen, so we have to follow the natural order of things.

Despite the lofty claims made by our rational mind, we want to hear and obey the voices of the gods. This non-rational desire is the root of cults and episodes of mass hysteria, i.e. the madness of crowds.

Humanity is in the grip of the secular cult of central banking. The cult's seers and prophets periodically emerge with arcane signs and readings, offering divinations to guide the followers.

The motivation to believe the cult is the natural order of things is powerful: greed. Those who heed the oracles of the cult enrich themselves, unbelievers impoverish themselves.

Rationalists outside the cult discern the structure of the cult and its core beliefs. The cult creates credit and "money" out of thin air and distributes it to the few extremely wealthy to further expand their wealth. These few do not improve productivity or the well-being of the many; they use the cult's gifts to exploit the cult's rigged casino of speculation to maximize their private gains.

In other words, the cult benefits the few at the expense of the many while proclaiming it benefits everyone. This is of course insane. The cult's core beliefs are: 1) enriching the already-rich magically trickles down benefits to the masses, and 2) this vast enrichment of the already-wealthy is cost-free. The economy prospers with no downside or consequences other than the glorious expansion of wealth at the top and the trickle-down of sweet goodness to the masses.

This is of course insane. The costs are borne by the masses and by the socio-economic system, which is now in thrall to a cult that has made the economy dependent on an ever-expanding credit bubble which feeds an ever-expanding asset bubble, which then enables a further expansion of credit which then fuels ever-higher assets prices.

And so on, forever, because the cult and its ever-expanding bubble are the natural order of things. If we don't sacrifice the many to benefit the few, the sun will stop rising and the Earth will be cast into endless shadow.

This is of course insane, but greed is a powerful motivation to be an ardent believer in the central banking cult. Expanding credit based on the expanding collateral of asset bubbles, each feeding the other, is held up not as insane but as a financial perpetual-motion machine, overseen and managed by the seers and prophets of the central bank cult. Followers heeding the cult's oracles become rich, non-believers and skeptics become impoverished.

Alas, cults and bubbles both come to an inglorious end. What seemed self-evidently true for the ages is revealed as a brief moment of self-serving delusion, supported by the immense powers of greed and the madness of crowds.

Do you hear the voices of the gods? Yes, yes, oh yes.



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When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
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The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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The "Oil Curse" and Splashy PR Announcements of Oil Production Cuts

It's not just the price of oil that matters: how much disposable income consumers have left to buy more goods and services matters, too.

The Oil Curse (a.k.a. The Resource Curse) refers to the compelling ease of those blessed with an abundance of oil/resources to depend on that gift for the majority of state/national revenues. The risks and demands of developing a diverse, globally competitive economy don't seem worth the effort when the single-source wealth of oil offers such a low-risk bounty of revenues.

This dependence becomes a curse when the market value of the oil/resources plummets. Having come to depend on that seemingly inexhaustible source of massive revenues, even states that have set aside prudent reserves soon find their expenses cannot align down to diminished oil revenues without unbearable political/social pain.

The ideal solution to this problem is to jawbone oil prices higher by splashily announcing major cuts in oil production and then ignoring the proposed cuts to pump as much oil as possible to restore spending to politically viable levels.

The problem is every other oil producer is pursuing the same game plan and so production doesn't actually decline. As global demand continues sagging in a global recession, oil supply remains at high levels. Since oil and other commodities are priced on the margin, even modest misalignments of supply and demand can generate huge swings in price.

There is no real enforcement of heavily promoted production cuts. The pressure on every oil producer is to assure the world they're complying to cover the reality that they're not actually cutting production because they can't afford to lose any more revenues.

The price of oil appears to be reflecting the global recession that's baked into receding stimulus and liquidity and higher inflation. China's attempt to secure Zero Covid is also exerting downward pressure on oil demand. As consumers globally come to grips with layoffs, depleted savings and maxed-out credit cards, demand can be expected to drop further.

All those who treated themselves to high living (vacations, dining out, etc.) on credit will soon find the noose of interest payments tightening around their necks, and all goods and services priced on the margin may fall with weakening demand, decimating hours worked, employment and profits.

There's another twist to The Oil Curse story: now that the easy-to-get oil is gone, it now requires massive, permanent investments in future production to keep the oil flowing. Governments seeing their revenues decline will naturally slash investment to fund the politically essential welfare-graft that enables their grip on power.

Starved of essential investment, oil production inevitably declines, further reducing revenues of oil-dependent states. This feedback loop is unforgiving: less investment leads to less oil which leads to less revenues which further squeezes investment.

It's not just the price of oil that matters: how much disposable income consumers have left to buy more goods and services matters, too. Put another way: demand can fall below supply for longer than oil producers can remain solvent.



My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


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Read more...